Six ways Africa can unlock its agricultural potential
Better farming methods and political commitment are ways to improve the agricultural industry.
Agriculture holds the key to broad-based economic growth, poverty reduction and food security in sub-Saharan Africa. This is according to Deutsche Bank senior analyst Claire Schaffnit-Chatterjee, in her report on agriculture for the bank. The following excerpt looks at how sub-Saharan Africa can unlock its agricultural potential. 1. Developing smallholder agriculture is crucial
Smallholder farming accounts for 80% of all farms and most of the land cultivated in sub-Saharan Africa. These 50m small farms produce the majority of agricultural goods and contribute in some countries to 90% of production. More than 75% of agricultural outputs in Kenya, Tanzania, Ethiopia and Uganda are produced by smallholder farmers. Some countries, such as Zambia, Mozambique, Kenya, Rwanda and Nigeria, have a relatively large number of commercial farms with some very large corporate farms in addition to a majority of small farms.
Farms are very small, on average, in most of sub-Saharan Africa. In West Africa, sizes tend to be slightly bigger but households as well.
The process of increasing the size of these small farms is slow, and various countries are experiencing a decrease in farm size. This is due to several reasons such as insufficient growth in urban jobs, inheritance systems that lead to sub-division of farms, land right systems that limit opportunities for consolidation, etc.
Given that small farms are here to stay for quite some time still, agricultural growth must include their transition to commercial farming. Agricultural growth that includes smallholders boosts food availability and incomes, and thus generates demand for locally produced goods and services, resulting in broad-based socio-economic development in rural communities.
2. Broader, more sustainable input use and irrigation
Low, inconsistent use of agricultural inputs is a crucial reason for low yields in sub-Saharan Africa. Low fertiliser use undermines not only the upcoming crops but also future ones since soil nutrients are continually mined.
Improving farmers’ incentives to use adequate amounts of fertiliser is key. In order to be effective, this has to go hand in hand with appropriate water management since faulty drainage leads to fertiliser washing away and applying fertiliser without adequate water amounts to burnt crops. The latter is of particular concern in a region where close to 75% of the surface area is dry land or desert. Climate change exacerbates the problem in a region highly vulnerable to drought and floods. Plant varieties also need to be adapted to prevent fertilised plants to develop stalk at the expense of grain, thus toppling over and being destroyed, as was the case in India for wheat and rice before high-yield varieties were developed.
Increasing the use of farm inputs has to be done sustainably. Excessive use of fertiliser during the Green Revolution in India and China led to soil depletion and drinking water contamination. This issue has acquired a new dimension with climate change. Agriculture is a heavy emitter of greenhouse gases (14% of all greenhouse gasses emissions are attributed to agriculture production, 25% if agriculture-driven deforestation is included). The main sources of agricultural greenhouse gasses are emissions of nitrous oxide from soil, mostly through fertiliser use and manure being transformed by soil bacteria.
A particular challenge in sub-Saharan Africa, dominated by fragile ecosystems, is to improve irrigation and fertiliser use without harming soils. Incentives for fertiliser use need to be designed to avoid leakages and distortions. Often linked to production, subsidies and pricing policies of agricultural inputs usually lead to overuse of pesticides, fertilisers, water and fuel or encourage land degradation.
Better farming methods
Changing the incentive structure can be achieved by increasing the efficiency of the use of agro-chemicals and promoting their replacement by agricultural practices which enrich the soil, reduce emissions and lower both agricultural production costs and import bills (e.g. multi-cropping, crop-livestock integrated production, use of bio-fertilisers and bio-pesticides, agroforestry).
Small-scale farmers in developing countries often do not have stable land tenure and this is not conducive to investing in soil fertility and other sustainable agricultural practices.
Use of machinery is also very low in sub-Saharan Africa. However, simple techniques are sometimes particularly appropriate for smallholders. As an example, “micro-dosing” – applying one bottle cap’s worth of chemical fertiliser – is cost-effective and avoids excessive use damaging soils.
3. Political commitment and public investment
In 2003, African heads of state pledged to allocate at least 10% of their national budgets to agriculture through the Comprehensive Africa Agriculture Development Programme (CAADP) and the Maputo Declaration. They also committed to achieving at least 6% annual agricultural growth. This has successfully guided actions to stimulate economic growth and reduce hunger and poverty through increased investment in agriculture even though Africa as a whole has not met the CAADP targets.
Agricultural spending has grown steadily (on average by 7.4% annually between 2003 and 2010) and quite a few countries are now meeting or surpassing the budget target. However, some countries still spend less than 5% of their national expenditure on agriculture, e.g. Sierra Leone and Uganda. In comparison, Asian governments during the Green Revolution spent more than 20% of their budgets on agriculture and the EU’s Common Agricultural Policy amounts to around 40% of the total EU budget. Ethiopia is one of the countries with the highest public expenditure on agriculture, both as a share of total public expenditure and per capita of rural population.
The agricultural growth rate improved to 3.8% per year on average – still well below the 6% target. A few countries have exceeded the growth target since 2003: Angola, Ethiopia, Guinea, Mozambique, Nigeria and Rwanda.
African governments have a key role to play all along the agricultural value chain since erratic government interventions are recognised as a constraint.
4. Closing the infrastructure gap
Lacking infrastructure is a well-known constraint to any operation in sub-Saharan Africa, particularly agriculture.
Infrastructure is crucial to increasing agricultural productivity and expanding agribusiness in sub-Saharan Africa, along many dimensions: water management, power, access to markets for both agricultural inputs and outputs including sturdy roads, storage, processing facilities, telecommunications for access to market information, etc.
The lack of meaningful market outlets prevents too many African subsistence farmers from embracing commercial farming. Long transportation times to the nearest town often translate into high transportation costs and post-harvest losses, especially during rainy seasons. Transit delays have a significant effect on exports. A one-day reduction in inland travel times has been estimated to lead to a 7% increase in exports. Over one-third of sub-Saharan Africa’s rural population lives five hours from the nearest town of 5,000 people. The World Bank estimated that, including maintenance, it would cost around US$110bn to provide 75% of the rural population in Africa with access to an all-season road within 2km.
If current investment rates persist, irrigated area is expected to expand only at around 1% annually, according to the Food and Agriculture Organisation. Given the role of irrigation as a productive input, the private sector has a natural role in investing in irrigation. The public sector has a role in regulating the sustainable use of a critical and limited resource. Given the high levels of the initial costs and risks involved, particularly in the absence of clear land rights, it makes sense to share them.
Similarly, the public good feature of roads and market infrastructures means that public-private partnerships can advantageously fill the gaps, providing that African governments create incentives for private investments.
5. Technology and human capital
Agricultural research for sub-Saharan Africa has to address a wide range of conditions such as diverse ecologies, frequent droughts, poor soil fertility and various types of pests and diseases. It is essential to develop high-yield varieties which are nutritious and resilient and to use cropping methods which are smallholder friendly and sustainable. In order to best respond to local needs, incorporating local knowledge is greatly beneficial.
A range of skills required in the broad agricultural sector are often lacking in sub-Saharan Africa, from practical training to farmers through agricultural extension services to academic education for full-time university students or agribusiness executives. Educating women is particularly important given their critical role in farm households. Women are responsible for 75% of the work involved in food production at large, 90% in food processing. As farmers, mothers, educators and innovators, they are a crucial link between food production, consumption and food security.
Encouraging rural youth to enter agriculture and to provide the training and services for them to succeed as commercial farmers or small and medium-level entrepreneurs is a particular challenge. It is ironic that, given the place of agriculture in sub-Saharan Africa economies, only 2% of students major in agriculture.
Building skills and entrepreneurship is slowly taking place with the introduction of new processes and problem-solving approaches. Some African universities have revamped their curricula and partnered with private firms to provide the skills in demand.
6. Facilitate trade
Fully exploiting the opportunities in domestic, regional and international markets is essential for sub-Saharan Africa to be able to tap its agricultural potential.
Pursue regional integration
The diversity of Africa’s agriculture and climate provides major opportunities for regional trade – especially since spatial correlation around rainfall and production tends to be low, even within a sub-region. However, only about 10% of agricultural trade is currently from within Africa. Although member states of all sub-regions have agreed to pursue free trade, implementation remains slow. Rather than export and import restrictions in order to protect their vulnerable populations when markets peak or collapse, governments can use more efficient instruments, such as strategic reserves or enhanced social protection systems.
Border trade continues to incur high transaction costs from official red tape and bribes. It has been estimated that the Burundi-Rwanda border adds the equivalent of 174km in terms of effect on food prices, the DRC-Rwanda border 1,600km. Simplification, greater transparency and, within sub-regions, harmonisation of procedures (on export/import licences, certification of origin, standards and sanitary regulations) are required. A Ghanaian grain trader association negotiated an agreement with border officials to recognise its trucks, thus speeding up border crossing.
Tap opportunities in international trade
Global agro-industrial exports have diversified significantly over the last two decades, towards processed and high-value horticultural products – accounting in 2008 for around half of global agro-industrial exports, three-quarters if semi-processed commodities are added.
Opportunities for sub-Saharan Africa to enter high-value markets in traditional export markets include premium-quality coffee, cocoa, organic food and beverages and Fair Trade products.
The importance of sub-Saharan Africa’s trade with emerging markets is increasing, with China, India and Brazil combined buying a third of sub-Saharan Africa’s exports in 2012. China alone buying almost as much as the EU (around $100bn). In terms of agro-industrial exports, China’s imports from Africa increased tenfold from 1990-2008 to $3bn and India sixteen fold to $1.4bn.
Unprocessed commodities and horticulture consist the vast bulk of sub-Saharan Africa’s horticulture exports to these two countries – with unprocessed commodities accounting for 86% of these exports to China in 2008, horticulture 51% of those to India.
Trade reforms that lead to the removal of the most distorting policies that hurt African agricultural trade will help to expand export opportunities for sub-Saharan Africa.
This article is an excerpt from Agricultural value chains in sub-Saharan Africa.